Green costs on energy bills 101
- 28 Feb 2012, 09:00
- Robin Webster
How much of your energy bill pays for government 'green'
policies aiming to reduce energy waste and cut carbon emissions?
You could be forgiven for being a little confused, given that
the media coverage
of the issue has been conflicting and at times
misleading.
There's a smorgasbord of numbers out there which are often taken
from deep within technical-looking documents from organisations
like UK energy regulator Ofgem which, if we're honest, is good at
knowing a lot about the mechanisms of the electricity market, but
not great at having a easy to use website.
In practice there are two main bodies who assess these costs - The
Department of Energy and Climate Change (DECC) and Ofgem. Reports
in the media and produced by other groups are usually either based
on these figures - or alternative interpretations of them.
So here's a cut-out-and-keep primer on what the numbers are and
where they come from, as clear as we can make it.
DECC Figures
Probably the most quoted figures - those from DECC - estimate that
energy and climate change policies currently make up around 7%
(£89) of the average household energy bill of £1,260. This breaks
down to 4% of gas bills and 10% of electricity bills.
DECC's breakdown of costs per policy looks like this - (and no,
we're not sure why 'Better Billing' is on the list):
| CERT Extension (home insulation) |
£38 (3%) |
| EU Emissions Trading Scheme (paying for companies to meet
quotas on emissions) |
£20 (2%) |
| Renewables Obligation (subsidising uptake of renewable
energy) |
£17 (1%) |
| Warm Homes Discount (rebate to vulnerable people for winter
fuel) |
£10 (1%) |
| Community Energy Savings Programme (energy savings for low
income areas) |
£3 (0%) |
| Feed in Tarriffs (subsidises microgeneration, notably for small
scale solar) |
£1 (0%) |
| Better Billing |
£0 (0%) |
| TOTAL |
£89 (7% of £1,260 bill) |
Source: Table D1, p.62,
DECC 2011.
Ofgem
Ofgem comes to similar conclusions - that environmental measures
account for about 7% of current domestic energy bills.
The most succinct and up-to-date source is the recent Ofgem report
Why are energy prices rising?, which estimates:
"Government environmental and energy
efficiency programmes add around £100 on to the average energy bill
of £1,300."
The figures differ slightly because Ofgem and DECC use slightly
different underlying assumptions about what an average bill is and
how to measure energy prices, but in practice it makes only a
limited difference.
A note on energy efficiency
Some government policies are intended to help householders save
energy. These include the
Community Energy Saving Programme, the
Carbon Emissions Reductions Target and the EU's
Products Policy, which is intended to increase the efficiency
of appliances.
In theory, these measures should help consumers reduce their
energy consumption, leading to lower bills. Because of this, DECC
figures consider the cumulative impact of green policy measures -
so they take into account that policies reduce energy use, cutting
bills.
On this basis, DECC argues that in 2011 energy and climate change
policies added just £19, or 2% to the average household energy
bill.
Whether you agree with these numbers or not will depend on to what
extent you buy the government's argument that its policies are
reducing energy use.
It's obviously more complicated to calculate this kind of figure
than it is to just tot up how much each of the programmes costs -
you really need to be able to assess what impact the policies are
actually having.
Read more...
Although we're not (yet) getting paper bills which show the
breakdown of what you pay, it is now, fortunately, easier to find
the information. Since the media blitz on this topic got going last
year, various official bodies have responded by laying out their
research more clearly.
If you want to go further into the numbers, there are now some
helpful documents you can dig into:
1. Ofgem's report from October of last year:
Why are energy bills rising?
2. DECC's report, released in November 2011:
The estimated impacts of energy and climate change policies on
energy prices and bills
3. The Climate Change Committee's report, released in December:
Household energy bills - impacts of meeting carbon budgets
That's it! Not the most exciting blog post, but hopefully a
useful one.